Feature

“This war for talent is like nothing we’ve ever seen before,” write the authors, who have spent decades studying talent management and leadership development. Recently they interviewed executives at more than 20 global companies to identify strategies for attracting talent in developing economies—where, they learned, brand, opportunity, purpose, and culture play out in particular ways. A desirable brand affiliation in conjunction with inspirational leadership appeals to eager young high potentials suddenly awash in possibilities. Opportunity should imply an accelerated career track—or at least a fast-paced acquisition of skills and experience. Purpose ought to benefit a job candidate’s home country and express the value of global citizenship. A company’s culture should be meritocratic, value both individual and team accomplishments, and follow through on promises implied in recruitment.

Lenovo, TCS Iberoamerica, Standard Chartered Bank, and HCL Technologies have all made a concerted effort to keep those promises. Lenovo, for example, very methodically provides development opportunities for its high potentials, with career maps that are linked to key slots across the globe. TCS puts Brazilian and Uruguayan leaders who are well connected and admired in their communities in charge of local operations. SCB lives up to its values by investing in renewable-energy businesses and supporting local communities through microfinance programs. HCL has empowered its employees with a revamped intranet that allows them to report problems with services and processes or ask the CEO direct questions.

The authors claim that emerging markets pose special challenges for foreign multinationals. For instance, talent strategies that work at home will probably need extensive tailoring to succeed in the developing world, and an overreliance on fluency in English may impede spotting talent. It’s critical to develop a core of local talent and to embrace and leverage diversity.

In the talent race, a local company that creates genuine opportunities and exhibits the desired cultural conditions will often win out over a Western multinational offering higher pay.

The HBR Interview

During his nearly 14 years at the helm of networking giant Cisco Systems, Chambers has developed an uncanny ability to sense market trends long before others do. He predicted, for instance, that voice transmission would become free long before computer networks could even carry it. And Cisco was one of the first to shift from call centers to web-based customer service.

Seeing the future is essential for a company that must start developing a product some six years before it goes to market. How does Chambers do it? He looks for what he calls “market transitions”—subtle social, economic, or technological signs of an impending disruptive shift—which, he says, start turning up five to seven years before the market actually grasps their significance. The move to open-source software development was one that Chambers saw and Microsoft did not.

Early on, Chambers learned to sense market transitions by listening closely to customers, connecting individual dots of behavior into patterns that indicated future trends. Later, he realized he needed to turn Cisco’s management processes upside down to benefit from that foresight.

In this interview, Chambers describes how he was able to surrender his role as a command-and-control CEO and institute a collaborative decision-making model that allows the company to respond speedily to emerging transitions. Managers throughout Cisco now form cross-functional teams, working together to identify and exploit new opportunities quickly. The model allows Cisco to simultaneously implement 22 major sales initiatives as effectively as most companies do one or two.

Feature

Multinational corporations from developed and developing economies alike are aggressively expanding their global presence, particularly in emerging markets. Industry traits largely determine the winners—but that needn’t always be the case, say Ghemawat, of IESE Business School, and Hout, of the University of Hong Kong. Companies can break the pattern by anticipating or creating new customer segments, managing cost convergences, or reworking the value chain.

Some established MNCs are succeeding in production- and logistics-oriented businesses, where local rivals usually have an advantage. One way is by using technology and capital to accelerate segments’ growth. Samsung, Sharp, and others surprised Chinese producers with vicious price competition in flat-screen TVs, which quickly collapsed the demand for conventional TVs, bottoming out Chinese profits. Another way established MNCs are beating emerging players is on costs, as home appliance companies in the United States did when Haier tried to enter the U.S. market for midsize refrigerators.

Conversely, some emerging-market challengers are outperforming established MNCs in knowledge- and brand-intensive industries. Bharti Airtel has built the largest mobile-services operation in India by specializing in a limited part of the value chain (customer care and the regulatory interface) and outsourcing the rest, which freed up capital, made Bharti’s cost structure more variable, and allowed the company to radically undercut advanced-market prices. Firms such as India’s Suzlon Energy are also spotting opportunities to bundle ancillary services and products in which they have an advantage.

The authors point to these examples and others to suggest that conditions are right for aggressive global players to move outside their industry comfort zones.

In the continuing quest for business growth, many CEOs are turning to their CIOs and IT organizations because technology is absolutely essential to two compelling sources of growth: innovation and enterprise integration. The speed of innovation often depends on the ability to coordinate across organizational boundaries. Innovations cannot reach a sufficient level of scale and impact unless they are integrated into the larger operations of the corporation. And yet, say recently retired Harvard Business School dean Cash, Oxford dean Earl, and nGenera director of research Morison, the two endeavors remain “unnatural acts”: Far too many large businesses are better at stifling innovation than at capitalizing on it, better at optimizing local operations than at integrating them for the good of the enterprise and its customers.

To make both pursuits seem more natural, the authors recommend creating two dedicated, IT-powered teams: a distributed innovation group (DIG) and an enterprise integration group (EIG).

The DIG serves as the center of expertise for innovation techniques, considers new uses for technology already being developed inside the company, looks for new developments outside the company, and provides experts for internal innovation initiatives.

The EIG selects the most promising from among competing integration projects, provides resources to give them a strong start, and then folds them into the operating model of the enterprise.

Without such agencies, the authors maintain, innovation and integration won’t spread far enough or fast enough throughout a large organization to keep pace with the smaller, younger, more technology-based competitors to which innovation and integration come much more naturally.

Free customers who are subsidized by paying customers are essential to a vast array of businesses, such as media companies, employment services, and even IT providers. But because they generate revenue only indirectly, figuring out the true value of those customers—and how much attention to devote to them—has always been a challenge.

Traditional customer-valuation models don’t help; they focus exclusively on paying customers and largely ignore network effects, or how customers help draw other customers to a business. Now a new model, devised by professors Gupta, of Harvard Business School, and Mela, of Fuqua School of Business, takes into account not only direct network effects (where buyers attract more buyers or sellers more sellers) but also indirect network effects (where buyers attract more sellers or vice versa). The model calculates the precise long-term impact of each additional free customer on a company’s profits, factoring in the degree to which he or she brings in other customers—whether free or paying—and the ripple effect of those customers.

The model helped an online auction house make several critical decisions. The business made its money on fees charged to sellers but recognized that its free customers—its buyers—were valuable, too. As competition heated up, the company worried that it wasn’t wooing enough buyers. Using the model, the business discovered that the network effects of buyers were indeed large and that those customers were worth over $1,000 each—much more than had been assumed. Armed with that information, the firm increased its research on buyers, invested more in targeting them with ads, and improved their experience. The model also helped the company identify the effects of various pricing strategies on sellers, showing that they became less price-sensitive over time. As a result, the company raised the fees it charged them as well.

Forethought

A new study of private equity buyouts shows that, on average, U.S. acquisitions made in “red” (Republican) states deliver significantly higher returns than acquisitions made in “blue” (Democratic) ones.

The shareholders, who provide capital, have the most at stake in a company and the biggest incentive to ensure its success—so they should call the shots and reap the biggest returns, right? Wrong, says a professor at IMD. He argues that in today’s firms, labor bears the most risk and provides the competitive advantage. Labor, therefore, should make the decisions and get the residuals.

A shortage of H-1B visas is preventing U.S. companies from hiring the foreign technical employees they need to fill their talent gap. Some firms are getting around the problem by seeking alternatives to basing employees stateside in the first place—and, in the process, are reaping other benefits.

The CEO of Chanel recalls her days as a young merchant, when she was taken to task by a powerful executive for not listening. Twenty years later, his words still profoundly affect the way she thinks about her company’s products and interacts with customers, employees, and other stakeholders.

Short-term, virtual, and cross-cultural teams have become the new norm, but building trust among team members is particularly challenging. That has implications for how managers should motivate and reward them.

Simple, inexpensive programs that teach managers to be more supportive of their direct reports’ work/life issues can generate big returns in employee health and satisfaction, according to a multiyear study of hundreds of frontline workers and dozens of supervisors.

HBR Case Study

Mark Landstad, relatively new to CliffBank’s investment banking division, has a veteran teammate, Nicole Collins, who appears to be a reliable ally. However, when Mark needs her help in locating vital information for his part of a presentation they will be doing together, she feigns ignorance. During the meeting, Nicole produces the data out of the blue and wows the attendees with her analysis. Knocked off balance by the sabotage, Mark clumsily seeks advice from his boss, who is a brick wall when it comes to interpersonal dynamics. How should Mark deal with his backstabbing colleague?

Maggie Craddock, president of Workplace Relationships, classifies Mark as an anxious pleaser, one of four power styles identified by her firm’s research. She surmises that Mark is actually sabotaging himself and recommends that he address his dilemma by first examining his own modus operandi.

R. Dixon Thayer, former CEO of I-trax and himself once the victim of coworker sabotage, has empathy for Mark. However, he criticizes Mark’s hasty, open-ended way of approaching his superior. Thayer lists four “rules for boss engagement” that Mark should follow, beyond proving that his sneaky colleague won’t stop him from getting results at CliffBank.

Deborah Kolb, of the Simmons School of Management, contends that Mark does not yet understand his division’s culture well enough to know whether Nicole’s behavior is the rule or the exception. Only by overcoming his political and interpersonal naiveté, she argues, can he learn how to negotiate relationships in his new setting.

Different Voice

The next U.S. administration will face enormous challenges to world peace, the global economy, and the environment. Exercising military and economic muscle alone will not bring peace and prosperity.

According to Nye, a former U.S. government official and a former dean at Harvard University’s John F. Kennedy School of Government, the next president must be able to combine hard power, characterized by coercion, and what Nye calls “soft” power, which relies instead on attraction. The result is smart power, a tool great leaders use to mobilize people around agendas that look beyond current problems.

Hard power is often necessary, Nye explains. In the 1990s, when the Taliban was providing refuge to Al Qaeda, President Clinton tried—and failed—to solve the problem diplomatically instead of destroying terrorist havens in Afghanistan. In other situations, however, soft power is more effective, though it has been too often overlooked. In Iraq, Nye argues, the use of soft power could draw young people toward something other than terrorism. “I think that there’s an awakening to the need for soft power as people look at the crisis in the Middle East and begin to realize that hard power is not sufficient to resolve it,” he says.

Solving today’s global problems will require smart power—a judicious blend of the other two powers. While there are notable examples of men who have used smart power—Teddy Roosevelt, for instance—it’s much more difficult for women to lead with smart power, especially in the United States, where women feel pressure to prove that they are not “soft.”

Only by exercising smart power, Nye says, can the next president of the United States set a new tone for U.S. foreign policy in this century.

Managing Yourself

Like the best-laid schemes of mice and men, the best-rehearsed speeches go oft astray. No amount of preparation can counter an audience’s perception that the speaker is calculating or insincere. Why do so many managers have trouble communicating authenticity to their listeners?

Morgan, a communications coach for more than two decades, offers advice for overcoming this difficulty. Recent brain research shows that natural, unstudied gestures—what Morgan calls the “second conversation”—express emotions or impulses a split second before our thought processes have turned them into words. So the timing of practiced gestures will always be subtly off—just enough to be picked up by listeners’ unconscious ability to read body language.

If you can’t practice the unspoken part of your delivery, what can you do? Tap into four basic impulses underlying your speech—to be open to the audience, to connect with it, to be passionate, and to “listen” to how the audience is responding—and then rehearse your presentation with each in mind. You can become more open, for instance, by imagining that you’re speaking to your spouse or a close friend. To more readily connect, focus on needing to engage your listeners and then to keep their attention, as if you were speaking to a child who isn’t heeding your words. To convey your passion, identify the feelings behind your speech and let them come through. To listen, think about what the audience is probably feeling when you step up to the podium and be alert to the nonverbal messages of its members.

Internalizing these four impulses as you practice will help you come across as relaxed and authentic—and your body language will take care of itself.

Best Practice

Leadership teams that can’t reach consensus wait for the CEO to make the final call—and often are disappointed by the outcome. Frisch calls this phenomenon the dictator-by-default syndrome. Many companies turn to team-building and communication exercises to try to fix the situation. But that won’t work, the author argues, because the trouble is not with the people, it’s with the decision-making process. Attempting to arrive at a collective preference on the basis of individual opinions is inherently problematic. Once leadership teams realize that voting-system mathematics are the culprit, they can stop wasting time on irrelevant psychological exercises and instead adopt practical measures designed to break the impasse.

They must begin by acknowledging the problem and understanding what causes it. When more than two options are on the table, the scene is set for the CEO to become a dictator by default. Even yes-or-no choices present difficulties, because they always include a third, implied alternative: “Neither of the above.”

When the CEO and the team understand why they have trouble making decisions, they can adopt the following tactics to minimize dysfunction: Clearly articulate the desired outcome, generate a range of options for achieving it, test “fences” (which can be moved) and “walls” (which cannot), surface preferences early, state each option’s pros and cons, and devise new options that preserve the best features of existing ones.

Teams using such tactics need to adhere to two ground rules. First, they must deliberate confidentially, because a secure climate for conversation allows members to float trial balloons and cut deals. And second, members must be given enough time to study their options and assess the counterarguments. Only then can they achieve genuine alignment.